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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The ability to set the price above the perfectly competitive level






2. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






3. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






4. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






5. Entry of new firms shifts the cost curves for all firms upward






6. The total quantity - or total output of a good produced at each quantity of labor employed






7. Exists if a producer can produce more of a good than all other producers






8. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






9. All firms maximize profit by producing where MR = MC






10. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






11. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






12. Two goods are consumer substitutes if they provide essentially the same utility to consumers






13. A good for which higher income increases demand






14. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






15. Ed = 1






16. 0 < Ei < 1






17. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






18. Es = (%dQs) / (%dPrice)






19. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






20. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






21. AFC = TFC/Q






22. Ed = 0 - no response to price change






23. The rational decision maker chooses an action if MB = MC






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






25. Ei > 1






26. ATC = TC/Q = AFC + AVC






27. When firms focus their resources on production of goods for which they have comparative advantage






28. The change in quantity demanded resulting from a change in the price of one good relative to other goods






29. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






30. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






31. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






32. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






33. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






35. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






36. AVC = TVC/Q






37. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






38. The additional cost incurred from the consumption of the next unit of a good or a service






39. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






40. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






41. A firm that has market power in the factor market (a wage-setter)






42. Product demand - productivity - prices of other resources - and complementary resources






43. Entry of new firms shifts the cost curves for all firms downward






44. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






45. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






46. Occurs when LRAC is constant over a variety of plant sizes






47. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






48. The lost net benefit to society caused by a movement away from the competitive market equilibrium






49. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






50. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it